The Problem of Urbanization Without Economic Growth

Throughout history, the two have not always gone hand-in-hand. And they may not in the future.

Some 200,000 people move into cities across the globe each and every day. Over the course of the next century, that figure will add up to billions. Mayors, urban leaders and economists are generally optimistic, believing that this march toward urbanization goes hand in hand with greater economic development and rising living standards. But that may not be the case. Today, rapid urbanization is not always accompanied by rising fortunes—particularly for the poorest people flocking to the rapidly growing mega-cities of the developing world.

I have previously written on the troubling persistence of global slums and the rise of what Edward Glaeser has dubbed “poor-country urbanization.” Now, in a recent study [PDF], economists Remi Jedwab of George Washington University and Dietrich Vollrath of the University of Houston look at the persistence of what they term “urbanization without growth” over the long sweep of history. In particular, they examine whether the urbanization of cities without an accompanying bump in living standards is a relatively new phenomenon limited to the rapidly growing mega-cities of today, or if it is a part of a pattern across history.

To answer that question, the study’s authors examine the connection between urbanization and economic development over the past five centuries, between the years 1500 to 2010. The authors amass a wealth of data from a wide variety of sources on urbanization levels, the size and growth of cities, and on levels of economic growth based on gross domestic product (or GDP) per capita. All in all, they assemble data for the 159 countries that account for 99 percent of the world’s population in 2010. They end up with 1,319 observations—though, as they readily point out, their data has much better coverage today that in the past (24 observations for 1500 and 18 for 1700, for example, compared to 159 from 1950 until 2010). Much of their analysis is conducted at the country level, comparing levels of urbanization to GDP per capita over time.

The study finds that urbanization without growth is not a new phenomenon. In fact, it recurs intermittently.

Broadly speaking, the researchers find urbanization to be associated with economic growth over the past five centuries, as the chart below from their study shows. They discover that tripling a nation’s GDP per capita increases the urbanization rate by an average 20 percent. Furthermore, they find that the entire world has urbanized in a very serious way over the past 500 years—regardless of per capita income level—by 25 to 30 percent.

(Jedwab and Vollrath)

But the nature of the connection between urbanization and growth varies considerably over time. The chart below, from the study, shows the association between urbanization and economic development in three discrete time periods: 1500, 1950, and 2010.

(Jedwab and Vollrath)

In 1500, signified by the solid black line, the relationship between urbanization and growth was relatively weak. Back then, the researchers find, the tripling of GDP per capita was associated with just a 12 percent increase in the urbanization. Even the most advanced nations at the time—Italy and the Netherlands—had urbanization rates of just 20 percent or so.

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By 1950, the relationship between urbanization and growth—signified by the dashed and dotted line—had changed considerably. Now urbanization was much more strongly associated with growth. A tripling of GDP corresponded with with a larger, 20 percent increase in urbanization across all nations. But the connection between urbanization and growth in this period was mainly a product of the most advanced nations. Developing and emerging nations remained rural and poor.

By 2010—highlighted with the dashed line—the relationship between urbanization and growth had changed again. Now poor countries, not the rich ones, are experiencing the most rapid urbanization. Overall, the researchers find that the relationship between urbanization and growth in this period is nearly identical to that of 1500: A tripling of GDP per capita is now associated with just a 13 percent increase in urbanization rates.

The rise of mega-cities and growth

The authors also look at how the development and location of mega-cities (which they define as “the largest urban agglomerations observed in a given time period”) have changed over time. The chart below shows their results.

(Jedwab and Vollrath)

In 1700, about 45 percent of the world’s mega-cities were in developing nations, as demonstrated by the solid black line. And in 1850, a full 150 years later, there had been little change in this proportion. As the researchers put it, “There was no distinct advantage to currently rich nations in the number of large cities prior to 1850.”

By 1900, the pattern changes. The mega-cities of the early 20th century were concentrated in the most highly developed countries: London (6.5 million) in the U.K., New York (4.2 million) in the U.S., and Paris (3.3 million) in France. Just 30 percent of mega-cities were in developing nations.

By 1950, the researchers identify another shift, back toward the developing world. In the middle of the 20th century, 45 percent of the world’s mega-cities were again in developing countries. And that proportion continued to rise: By 2010, nearly 80 percent of the world’s mega-cities were in developing nations. The light grey line shows these same trends, excluding population giants China and India, and the pattern holds. This suggests that the association between poor countries and rapid urbanization is not just due to a population explosion in a few large, developing nations; it holds for smaller ones, as well.

The findings of the study suggest that the mid-20th century connection between urbanization and growth may well be a historical anomaly.

The key takeaway: We should stop assuming that urbanization and development are inextricably linked. As the researchers write, “Urbanization has occurred throughout history without necessarily being associated with manufacturing expansion or with rapid economic development, as during an industrial revolution.” Rather, it appears that urbanization is an innovation, not a mere consequence, of a more powerful economy.

“The idea of large cities and high urbanization rates has, like many other innovations, diffused slowly across countries and time,” the researchers write.The process of that diffusion looks like urbanization without growth, they find, and it’s been occurring for centuries. Indeed, the findings of the study suggest that the mid-20th-century connection between urbanization and growth may well be a historical anomaly, limited to the countries that developed more or less during the industrial revolution: the United States, Canada, Western Europe, and Japan.

What’s less clear is the causal relationship between urbanization and growth. Does urbanization cause or (hinder) economic development? When exactly—and under what conditions—do the two go together? And what, if anything, can be done when urbanization and growth fail to work together to generate higher living standards? Those are the questions that we need to answer—the ones that will determine the livelihoods and well-being of billions of future urbanites around the world.

About the Author

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.